I sold personal real estate for the first time. Income from the sale is going for upgrades to my primary residence. Do I owe capital gains tax?

[oinerja]

I have read that there are no capital gains taxes on the first sale where I sold the property for more than I paid.  Is this true?

[Bsch4477]

No, it’s not true. You will have to pay capital gains. 

[Carl]

The laws changed over 20 years ago, in 1998 I think. Now-a-days, when you sell real estate at a gain, it doesn't matter what you do with the proceeds. The gain is still taxable income.

[VolvoGirl · Accepted solution]

Starting in May 1997, the new rule is.........For a primary home, if you owned and lived in your house for 2 out of the last 5 years on the date of sale when you sell you can exclude the gain up to $250,000 for single or 500,000 for married from tax. You can not take a loss on your tax return. The rule about rolling over the gain to the next house went out in May 1997.